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The Ministry of Finance of the Arab countries has announced the launch of three new ministerial decisions on the law “On the taxation of corporations and enterprises”.
The discussion is about three solutions:
Ministerial Decision No. 116 of 2023 on exclusion from participation.
Ministerial Decision No. 114 of 2023 regarding imagery and accounting methods;
Ministerial Decision No. 115 of 2023 on Pension and Social Security Funds;
Exclusion decision
The “participation exemption” decision means that a UAE company that owns shares in foreign companies can be exempt from paying taxes on dividends. For this company, it is necessary to own a share of at least 5% in a foreign company and to be the holder of such a share for at least 12 months. Participation exemption if the subsidiary is located in a country with a tax rate of at least 9% or shows that it pays an effective tax rate of at least 9% on its profits, income or equity. This decision also clarifies that the exemption is granted to one-time types of rights holders, such as preferred shares, ordinary shares and others. But to receive this benefit, the total value of the right must be at least 4,000,000 dirhams.
Solutions for a wide range of accounting methods
The Accounting Standard and Method Decision provides guidance to businesses on the preparation of Financial Statements that will form the basis for calculating taxable income. According to the decision, International Financial Reporting Standards (IFRS) are the applicable accounting standards in the UAE and must be adopted in accordance with international accounting standards for more than AED 50,000,000. The solution also allows small and adult businesses with revenues of less than AED 50,000,000 to use IFRS. Assumptions, samples do not exceed 3,000,000 dirhams, can calculate the tax base on the basis of cash accounting.
Pension Fund Solutions
The Pension and Social Insurance Fund (SIF) decision sets out additional conditions to exclude pension funds and SIFs in the UAE from corporate court. The decision to consider this RIAC case is tax practice and the legality of such a decision from the point of view of other countries, which is probably the basis for considering the case for the avoidance of double taxation. In addition, the decision clarifies the maximum disbursements per beneficiary and the requirements for annual confirmation of compliance with the statutory auditor.
